Economy Strains Under Weight of Unsold Items

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Economy Strains Under Weight of Unsold Items - washingtonpost.com: "'In China, during the boom, there was huge over-capacity in various lines of activity ranging from shoes and clothing, light manufacturing -- all of that stuff. So that is why from the perspective of U.S. companies, we have found it so important to be on the innovative edge,' said Harvard business professor Joseph L. Bower. 'The only way to create value is to be on the innovative, high-tech, fashion-forward side.'

If the credit crunch in the United States persists, 'companies will find it difficult to invest in technology for a while, and then once the financial markets are back on track and demand recovers, companies will find themselves in difficult position,' Comin said. 'Productivity growth will be declining for a while. They will have a hard time catching up."

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The Darkest Hour

Image by artemuestra via FlickrFrom economy.com, Marc Zandi gives his upbeat look ahead to the national economy in 2008. Among the highlights:

• The coming year will be the worst in decades for the U.S. economy as millions of jobs are lost across nearly all industries, occupations and regions.

• Although the crisis began with excesses in the financial system, it was exacerbated by policy missteps that led to financial panic.

• Despite their past errors, only concerted action by policymakers can end the panic and prevent the forecast from turning darker.

• Even if the recession ends this year, recovery will be slow, with GDP not reaching its pre-recession peak until late 2010.

• The current episode, while painful, could lead to needed reform of the financial and regulatory system.

This will likely be the worst year for the U.S. economy since the end of the 1930s. The recession that began 13 months ago will plague much of 2009, particularly during the first half of the year.

Real GDP is expected to fall 3% peak to trough, and close to 5 million jobs will be lost. The unemployment rate will surge to 9%. The drop in manufacturing will be especially severe, but the hallmark of this downturn will be its breadth across industries, occupations and regions. More than 300 of the nation's 381 metropolitan areas will be in recession; unlike in past recessions, which were regionally concentrated, there is no obvious place to move for better prospects in this downturn.

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